Canada’s Nova sees Q4 natgas surplus, PE peak in ’04

16 September 2003 23:17  [Source: ICIS news]

TORONTO (CNI)--Canada’s Nova Chemicals said Tuesday that North American natural gas markets could be in surplus before year-end, and Nova also forecast a polyethylene (PE) peak for 2004.

Nova top executive Jeffrey Lipton told analysts at an investor conference today: "More gas is coming to the market than most people believe."

Pointing to high gas drilling activity, particularly in Canada, and high storage levels, Lipton said: "For me it’s not hard to believe that we’ll see gas storage full and actually experience excess supply before winter sets in."

He noted that natgas prices have come down, adding: "I personally believe that trend will continue."

Lipton also said that while natural gas prices are important for Nova, the company is actually much less exposed to gas price risk than the average North American ethylene (C2)/PE producer, "something that is not quite fully appreciated" by investors.

Lipton said Nova produces 75% of its C2 in Alberta from gas liquids, but sells 66% of that into the market on a "services cost plus mark-up" basis, thus enabling Nova to "instantaneously" pass on raw material costs for 66% of its Alberta C2. The remaining 25% of Nova’s C2 comes from its flexi-cracker in Corunna, Ontario, he noted.

Lipton said that it is thus not correct to view Nova as a "high risk natural gas feedstock-based producer. We are actually not at the mercy of natural gas markets."

Commenting on the demand outlook, Lipton said: "Things look like they might be getting better" as a "challenging" third quarter ends.

Lipton said major economic indicators "are moving in the right direction."

He said Calgary, Alberta-based Nova believes that a "large and strong peak" in global PE markets could begin in 2004, driven by strong downstream plastics demand.

Particularly in North America "we are talking about a very long period of strength for PE," Lipton said.

He said since 1995 the number of North American PE producers has been cut in half. "With few producers, just now rising from a long period of over-capacity and concerns about natural gas, we see very little new capacity announced," he added.

By: Stefan Baumgarten
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly